DO YOUR INVESTMENTS HAVE A FUTURE?

In 1975 an unsuccessful man by the name of Gary Dahl was hanging out with friends at their favorite bar. They happened to be discussing their family pets and how much trouble they were. The more they drank the louder they laughed until Gary, without any forethought, blurted out that he had the best pet in the world. His pet needed no food or care or training. “What possible pet is this?” his friends asked. Gary responded that his pet was a perfectly behaved little rock. The group laughed and headed to their homes but the conversation inspired Gary to create the Christmas gift sensation of 1975, the Pet Rock. In a short three months he sold over a million rocks for $4 each (which he purchased for a penny). Then as quickly as it began the fad ended and Gary walked away with a small fortune, leaving a huge pile of unsold rocks in his storage yard.
 
Years ago I attended a convention with a speaker who was teaching us how to build a successful company that would leave a lasting legacy. He asked, “What impact would it have on the world if you disappeared? If your company disappeared?” The question had such impact on me that I keep the saying on my phone where I can see it regularly. It is a humbling thought to consider how and if you will be missed when you are gone.  
 
I have found great value in applying this question to the businesses I evaluate for investment purposes, recognizing that a company that would be desperately missed should have more staying power through the ups and downs of the economy. I suggest investors look through their own portfolios item by item and consider the same question.
 
In many cases you might realize our modern lives have become heavily dependent on the products and services you have invested in. If so, then you are probably on solid footing with these investments. In a few instances you may find companies that produce a currently popular product, but one which could fade away without too many people noticing it gone. With these, proceed with caution lest you be caught holding an investment that was yesterday’s news. And finally, you may even find one or two that fall under the “Pet Rock” heading where the only people who would care if the company failed would be the investors.  I doubt many people still own their pet rocks or would even admit to having bought one.
 
A company whose absence would not be missed may offer a higher risk for a retired investor who needs an income stream they can depend on. As you evaluate your portfolio based on this question, focus on products and services you feel the world just can’t live without. The Pet Rocks did well for Gary Dahl, but after Christmas he sold his remarkable trademark pets to other investors who, over 40 years later, are still waiting for the world to want their product again.